Baby Dylan is only thinking about
crawling across the floor at the moment. But as the six-month-old gets
bigger and wants to stand, toddle about and then romp around his
parents’ flat, he’ll need much more space.

‘That’s when the full force of the nightmare of renting in a flat is going to hit us hardest,’ frets father Jeremy Cole.

‘With
a new family, we’d love to be able to buy our own place with a garden
and start to make a real home. There’s stability for Dylan, a secure
environment, friends and schools to think of.

‘But it’s nigh-on impossible to be able to save enough money to scrape together a deposit to get a mortgage.

‘Even though our income is more than many, with savings rates where they are, building a decent-sized pot is a mammoth task. It’s just off the scale.’

A small two-bedroom terrace house in Havant, near Portsmouth, where Mr Cole, a 49-year-old design engineer, and his wife Bonnie live, is on the market for £150,000.

It doesn’t sound like it’s out of range for a middle-income couple like the Coles, who have a combined income in excess of £40,000, boosted by Bonnie working part-time as a store assistant.

If they could stump up a five per cent deposit of £7,500, they could get a mortgage with monthly payments of £792 — which would be affordable on their current income.

Although it’s higher than the £565 a month they pay in rent for their two-bedroom flat — which they deliberately chose to save money — they say the extra cost to finally get on the ladder would be worth the effort.

But a property remains out of reach. On top of childcare costs of £200 a month, a £160 bill for petrol for the family car and loan repayments for money spent on their recent wedding, there just isn’t enough to make any headway.

‘Whenever we’ve built up enough savings to actually think a deposit is within reach, we’ve then been hit by fees for landlords and letting agents, as well as moving costs,’ says Mr Cole.

‘And despite taking really good care of our rental property, we never get our full deposit back. Now that Bonnie is working only part-time so she can look after the baby it’s going to be even harder to save.’

The Coles’ rental nightmare doesn’t just concern financial woes. Fierce competition and rising rents have also forced them to regularly move: they have had to change flats every year since 2008.

Mr Cole says: ‘The worst part is that you never ever feel at home. ‘You can’t paint the bathroom, put pictures on the wall or grow anything in the garden because you’ll probably move before you see the rewards.

‘And it’s actually really embarrassing having to rent. Most people I know now own a property — but they got help from their family. Neighbours look down on you and have the attitude you don’t really have as much right as them to be there. It’s like you’re a second-class citizen.’

Thanks to a toxic mix of a lack of new homes, a resurgent property market, rock-bottom savings rates, tougher mortgage rules and soaring rents, a record number of middle-income families are caught in the rental trap.

It is these aspiring families — often dubbed the ‘squeezed middle’ — who are also suffering from rising living costs and negligible annual payrises.

A staggering one in five families now rents privately in the UK. That’s a massive 1.2 million households including single parents, according to Shelter housing charity — up from just one million two years earlier.

Meanwhile, home ownership is at 64 per cent, the lowest figure for nearly 30 years. In 2001, the figure was 70 per cent.

And according to the English Housing Survey, the pace of renting is accelerating at an alarming rate.

The most recent figures for England show a staggering 874,000 couples with children rented a house or flat in the private sector last year.

This figure is up by nearly a third over just one year. In 2008/2009, it was 535,000, and in 2006/2007, it was 386,000.

In six years, it has more than doubled. Experts believe it is likely to hit one million in the next twelve months.

Now fears are growing that new Government schemes such as Help To Buy will push prices beyond even more people’s reach, and that only the lucky few with cash from parents or grandparents will be able to clamber onto the housing ladder.

Sam Bowman, director at the Adam Smith Institute, says: ‘Making taxpayer-subsidised handouts to homebuyers will only drive further house prices up.

‘This risks a bubble, improving access for a select few but making housing even more unaffordable for most people.’

Affordability fear: The house price-to-earnings ratio shows how property prices never fell back to their average affordability in the post credit crunch slump.

HOW WE BECAME A NATION OF RENTERS

The major factor pushing ownership out of reach is high house prices.

Despite the credit crunch pushing down prices nationwide, in some places by a fifth, they have bounced back in many parts of the country, and are growing at pre-2007 levels.

House prices have jumped by almost £500 a month over the summer as the market continues to recover.

The average price for a UK home now stands at £170,514 — up 3.5 per cent from last August, according to Nationwide Building Society. At the start of the property price boom in 1996, it was just £62,000.

Today’s house prices are out of reach for most first-time buyers who don’t have wealthy parents to call on for help with a deposit.

In July, Shelter suggested a staggering £2 billion was being contributed by parents to help children of all ages — from 18 to mid-40s — on to the property ladder.

The average handout is £17,000, which is enough to cover a 10 per cent deposit for the average property.

It also discovered almost a third of property purchases wouldn’t have happened without help from the buyer’s family.

Today, to get a decent mortgage at around 4 per cent you need at least a 10 per cent deposit. Even a 5 per cent deposit — which would allow you to qualify for a mortgage at 5.5 per cent — requires you to save £8,500.

Yet while house prices have risen sharply, wages have not followed suit.

Pay freezes introduced in the wake of the financial crisis mean wages are stagnant.

In fact, thanks to inflation, real earnings are back to where they were in 2003, according to the Office of National Statistics.

So while in 2001 the average house price in England and Wales was six times the average person’s annual salary, today it is nine times your yearly wage. At this rate, it is impossible to get a mortgage without a huge deposit.

But on top of this, savings rates have sunk to rock-bottom. Not a single savings account beats inflation — which currently runs at 2.8 per cent.

The average interest rate on an easy access savings account is just 0.7 per cent, according to Moneyfacts.

‘This gives you just £7 interest on every £1,000 saved — a risible sum for anyone trying to save for a deposit,’ says Justin Modray at financial advice site CandidMoney.com. It takes an earning couple real dedication to save huge chunks each month if they’re serious about buying — and many just don’t got the spare cash to do it.’

And things aren’t likely to improve any time soon. Last week, Mark Carney, the new Governor of the Bank of England, hammered home his message that interest rates were unlikely to rise before 2015.

Savers, he said, would have to take a second seat to economic growth — which means continued low rates.

Even getting a mortgage is also more difficult.

Banks have become far pickier about who they will lend to, using tougher affordability criteria to make sure borrowers run less risk of missing monthly payments.

Meanwhile the financial crisis has seen many previous owners forced back into renting because they couldn’t afford their mortgage repayments.

This has opened up huge opportunities for buy-to-let investors, who are increasingly able to take advantage of mortgage rates as low as 1.74 per cent for a two-year fix.

With a back book of income- generating properties, the investors are attractive to lenders and better able to snap up homes with greater financial firepower.

This has created a vicious circle for many renters. With fewer homes available to buy and greater demand for rental properties, prices have soared.

CHILDREN PULLED OUT FROM SCHOOLS

It’s no longer only students and young professionals who live in private rented accommodation. There are nine million people of any age classified as renting in England and Wales, and a third of these are families with children, figures from the Office for National Statistics shows. Half are older than 35.

‘Renting is particularly worrying for families, as if they are moving regularly it means children have to change schools and can’t get a stable education,’ says a spokesman for Shelter.

‘One in ten renting families have had to pull their children out of school due to moving over the past year.’

The instability, down to the need to regularly move, can be very damaging. A third of private renters only stay in the same property for less than a year; two thirds for less than five years.

Campaign group PricedOut also says the quality of accommodation is a major worry for families.

Spokesman Duncan Stott says: ‘Private renting in the UK is simply not fit for purpose for the one in five families who are stuck there.

‘The houses available to rent are often the most likely to fail the decent homes standard, and getting the keys to the house often means paying rip-off fees to the landlord’s letting agency.

‘Worse, the contracts last for 12 months at best, meaning no stable home for their children.’

Steady returns: Landlords have been attracted by the income from rent, this map shows the yields buy-to-let can deliver.

RECORD £738 RENTS HINDER SAVINGS

Increased demand for rental properties has pushed the cost of renting a flat or house to a record high.

In July, the average rent in England and Wales hit £738 a month — up from £676 in 2010.

And that is just the average. In London — where half of all households rent — the average cost is an eye-watering £1,118.

Even in the North East, where rents are cheapest, it still costs tenants £527 a month.

For anyone earning the national average wage of £26,500, this means just under half of take-home monthly is taken up with rent.

On average, private renters spend 43 per cent of their income on rent, compared with an average of 19 per cent of income paid out on a mortgage by owners, and 29 per cent spent on rent by social tenants.

And costs are only going to increase further as demand gets tighter.

Letting expert LSL Property Services expects average rents in England and Wales to hit £800 a month by mid-2015 — up a fifth since 2010.

This means it is only going to get harder for those stuck renting to save for a deposit.

FEES AND CHARGES ADD TO THE MISERY

On top of rent, there are often also ludicrously high letting agent fees.

In recent months, both MPs and the Office of Fair Trading are calling on the Government to crack down on rogue letting agents who exploit tenants and landlords with sky- high fees.

Last October, Money Mail revealed how some tenants were being made to pay £2,200 in fees and deposits before they had even moved in.

Admin fees which supposedly cover the cost of drawing up paperwork can range from £90 to £375. Other middlemen charge additional fees for drawing up an inventory, performing a credit check and even dealing with your deposit — which can often be as much as £2,000 upfront.

And the charges don’t stop once a tenant moves in. Frequently, there is a £90 fee for renewing a contract. Experts say there is no justification for agents charging this much.

Many of these fees are hidden in the small print and not revealed to tenants until after a contract has been signed.

The problem is that letting agents are unregulated, with only some signing up to a voluntary code of practice such as the Association of Residential Letting Agents. As of April, though, they must belong to an approved redress system.

Shelter says it received 85,000 complaints about rogue landlords in 2012. Many neglect their properties and, as a result, around 1.4 million houses do not meet the basic standard of being a decent home.

The other major problem faced by renters is the length of tenancy agreements. Renters rarely get a contract for longer than 12 months, after which they can be evicted by their landlord without reason with only two months’ notice.

WHAT ABOUT HELP TO BUY?

The first part of Help to Buy allows first-time buyers and home movers buying a new build home to boost their deposit by up to 20 per cent of a property's value, writes Simon Lambert.

They must put down at least a five per cent deposit and can then borrow the rest as a five-year interest-free loan from the Government. At the end of that period interest will be charged, starting at 1.75 per cent in the sixth year, with the rate rising by RPI inflation plus 1 per cent each year.

So if RPI inflation is 4 per cent in the seventh year the rate will be five per cent higher the next year at 1.84 per cent. At this rate it would take 10 years for the rate on the extra borrowing to reach 3 per cent, if inflation picks up it could rise faster.

The second part of Help to Buy will offer to cover mortgage lenders' losses up to 15 per cent of a property's purchase price, as long as a borrower puts down a 5 per cent deposit. This essentially bumps their deposit up to 20 per cent of the home's value.

This aims to get the mortgage market for those with small deposits moving and bring down rates to levels closer to those offered to people who can put down larger amounts or who have more substantial equity.

While highly tempting to buyers, both parts of the scheme have been criticised as not just helping to support house prices that are already too high but being highly likely to send them even higher.

It’s easier said than done, but the best way of escaping is to save, save, save to raise the biggest deposit possible.

It may sound drastic but the easiest way of doing this is to move in with parents or family for a fixed period. Even one to two years could make a difference.

Over a year you could save £8,856 by skipping the average £738 a month rental payment paid in England and Wales.

This, of course, assumes your family has the space and is willing to take on you and your family rent-free.

If you are saving for less than five years it is pointless risking your cash on the stock market. Instead, save in bank accounts paying the best rates of interest. Although it won’t be much, it’s better than nothing.

THIS IS MONEY TOP TOOLS

The best Cash Isa is with Tesco at 2 per cent. The best savings account is Sainsburys’ eSaver Special at 1.24 per cent (1.55).

Since the credit crunch, banks have made it harder for everyone to get a mortgage, but if you can rustle up at least a 5 per cent down payment you can still climb on to the housing ladder.

Be aware, though, that interest rates can be eye-wateringly expensive, making your mortgage more costly. Also remember, even a small drop in house prices could put you in negative equity.

The best five-year deal is with Leeds BS at 5.39pc with a £999 fee. Monthly payments on £150,000 are £911 and the total cost is £55,659.

For those able to raise a 10 per cent downpayment, things are a little better. Nottingham BS has a five-year fixed rate deal at 4.39 per cent with a £299 fee. Monthly payments on £150,000 are £824 and total cost is £49,739.

If you want a new home you could consider taking out a loan through the Government’s Help To Buy scheme.

It allows you to buy a new build property worth up to £600,000 with a 5 per cent deposit and a 20 per cent equity loan. Because you have the equivalent of a 25 per cent deposit, the mortgage rates you are offered are generally cheaper.

The catch is that you repay the loan by handing over 20 per cent of the value of your home when you sell.

It may be worth waiting until January when the second stage of the Help To Buy scheme is rolled out.

This is a £130 billion mortgage guarantee scheme which could see the market flooded with 500,000 cheap loans for those with as little as a 5 per cent deposit on any property worth up to £600,000. Unlike the first part, you do not need an equity loan.

Those unable to save could turn to friends or family.

Aldermore Bank will allow homebuyers to borrow 100 per cent of the property’s purchase price, without putting down a cash deposit. However, a guarantor (usually a parent) must be willing to have a charge on 25 per cent of their own property for ten years.

It’s three and two year fixed-rate deals charge interest at 5.48 per cent with a £1,298 fee, giving monthly repayments of £919 on a £150,000 loan.

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